With retirement around the corner... Now is the time to plan for your financial needs
Retirement planning in your 50s & 60s is a critical phase, as you're likely getting closer to or are already in retirement. The focus shifts from aggressive accumulation to preserving wealth, generating income, and making strategic decisions about Social Security and Healthcare.
Here's a breakdown of key considerations:
- Assess Your Current Financial Situation and Goals:
- Calculate Your Retirement Expenses: Understand what your monthly and annual expenses will look like in retirement. This includes essential costs (housing, food, utilities, healthcare) and discretionary spending (travel, hobbies, entertainment). Many experts suggest you'll need 70-80% of your pre-retirement income. And many analysts say that the average Social Security check(s) typically provides about 40% or about half of that.
- Inventory Your Assets and Income Streams:
- Savings: 401(k)s, IRAs (Traditional and Roth), brokerage accounts, HSAs.
- Pensions: If you have one, understand your payout options. And the recent rule changes to WEP/GPO. The reduction rules were removed.
- Social Security: Estimate your benefits at different claiming ages (62, 65 with Medicare, 67 - Full Retirement Age for most, 70 – MAX Benefit).
- Other Income: Any part-time work, rental income, etc.
- Define Your Retirement Vision: What do you want your retirement to look like? Travel, hobbies, spending time with family, or something else? This will heavily influence your financial needs.
- Maximize Your Savings (If Still Working):
- Catch-Up Contributions: If you're 50 or older, you can make additional "catch-up" contributions to your retirement accounts (401(k)s, 403(b)s, 457(b)s, and IRAs).
- Fully Fund Your Retirement Accounts: Contribute as much as you can to your employer-sponsored plans and IRAs. Take advantage of any employer matching contributions.
- Consider a Solo 401(k): If you're self-employed, a Solo 401(k) allows for higher contributions as both an employee and an employer.
- Strategic Social Security Claiming:
- Understanding Your Options: You can claim Social Security as early as age 62 or any time after that. Could also be at 65 when you claim Medicare Parts A&B, at your Full Retirement Age (FRA - typically 66 or 67 depending on your birth year), or as late as age 70. Which is the MAX and creates a 124% PIA Amount if your FRA was 67.
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Impact of Claiming Age:
- Claiming Early (62): Results in a permanently reduced monthly benefit. As low as 70% of your PIA.
- Claiming at 65: 86.6% of your PIA
- Claiming at FRA (66-67): You receive 100% of your Primary Insurance Amount (PIA).
- Delaying Past FRA (up to 70): Your monthly benefit increases by a certain percentage (8% per year for those born in 1943 or later) for each year you delay, up to age 70. This can be a significant boost to your guaranteed income. With a FRA of 67, your PIA would be increased up to 124%.
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Factors to Consider:
- Life Expectancy: If you anticipate a longer lifespan, delaying benefits generally leads to higher cumulative payouts. If you have health concerns, claiming earlier might make sense. See a good Life Calculator at www.LivingTo100.com
- Marital Status: Spouses have options for coordinating benefits to maximize the household's total Social Security income, often involving one spouse delaying while the other claims earlier.
- Employment Status: If you claim early and continue working, your benefits might be temporarily reduced if your earnings exceed certain limits. (Earnings Test / IRMAA)
- Use the SSA Website: Get personalized estimates of your benefits at ssa.gov. Can download your personal record and we use that for your RSSA Analysis.
- Consider Professional Advice: A financial advisor like an RSSA can help analyze your specific situation and recommend the optimal claiming strategy.
See our Social Security Planning Tools at:
Registered Social Security Analyst
- Plan for Healthcare Costs:
- Medicare: Understand how Medicare works (Parts A, B, D, and Medigap/Medicare Advantage). If you haven't already, familiarize yourself with enrollment periods. Enrollment typically begins three months before your 65th birthday and ends three months after.
- Before Medicare: If you retire before age 65, you'll need to bridge the healthcare gap with COBRA, an ACA marketplace plan, or private insurance.
- Out-of-Pocket Expenses: Even with Medicare, you'll likely have out-of-pocket costs (premiums, deductibles, co-pays).
- Long-Term Care: This can be a significant expense. Consider long-term (expensive) or short-term (affordable) care insurance or other strategies to address potential needs.
- Health Savings Accounts (HSAs): If you have an HSA, these are incredibly valuable in retirement because they offer a triple tax advantage: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. Funds can be used penalty-free for non-medical expenses after age 65 (though they'll be taxed as ordinary income).
- Manage Your Investments:
- Shift in Strategy: As you approach and enter retirement, your investment portfolio should generally become more conservative to protect your capital. This typically involves reducing your exposure to stocks and increasing your allocation to bonds and other fixed-income investments.
- Diversification: Maintain a diversified portfolio across different asset classes to manage risk.
- Tax Deferred Growth / Monthly Income: Annuities can be a great way to move money into safer investments with higher returns than CDs without the risk of losing principal. Latest rates about 5.4%, but contact us for the latest updates. Click HERE
- Withdrawal Strategy (The 4% Rule): A common guideline is the 4% rule, which suggests withdrawing 4% of your portfolio's initial value in the first year of retirement, then adjusting for inflation annually. This is a guideline, and the optimal withdrawal rate can vary based on market conditions and your individual circumstances.
- Tax Planning: Develop a tax-efficient withdrawal strategy, considering the tax implications of different account types (pre-tax 401(k)/IRA vs. Roth IRA vs. taxable brokerage accounts).
- Debt Management:
- Pay Off High-Interest Debt: Prioritize paying off credit card debt and other high-interest loans before retirement.
- Mortgage: Ideally, aim to pay off your mortgage before you retire to eliminate a major monthly expense.
- Downsizing/Moving: Owners of Cypress Health are also Realtors with CB&A Realtors and have been helping clients Sell/Buy homes in Houston since 2002. We still have a team in place and offer discounts on those services for our Medicare / Insurance clients. www.HAR.com/JasonBrm
- Other Important Considerations:
- Review Insurance Policies: Assess your life insurance, Hospital / Accident insurance, Short Term / Home Health Care and other policies to ensure they still meet your needs. You may need less life insurance if dependents are grown and debts are paid off. But there are certain things Medicare DOESN’T cover that your previous Employer Insurance did! More Info HERE
- Estate Planning: Establish or update your will, trusts, power of attorney, and healthcare directives to ensure your wishes are carried out and to simplify matters for your loved ones.
- Consider Working Part-Time: Many people choose to work part-time in retirement. This can provide additional income, keep you engaged, and delay drawing down your savings.
- Relocation: Consider if relocating to a lower cost-of-living area or a place with a better tax environment for retirees could improve your financial picture.
- Real Estate Taxes: Don't forget to file for your Residential Over 65 Exemptions: Harris County / HCAD
- Consult a Financial Advisor: A fee-only financial advisor can provide personalized guidance, help you create a comprehensive retirement plan, and navigate complex decisions.
Retirement planning in your 60s is about making informed decisions to secure your financial future and enjoy your golden years. We are here to help you out with many aspects of that!
To Review Your Best Options, can Call / Text at 346-567-8300, E-mail or Schedule an Appointment at the top right of this web site.
Prepare for your Medical Needs:
Medicare is a health insurance plan for people who are 65 or older and people who are disabled or have permanent kidney failure. Medicare has three parts—hospital insurance, medical insurance and prescription drug coverage. Most people have all three parts:
- Hospital insurance, sometimes called Part A, covers inpatient hospital care and certain follow-up care. You already paid for it as part of your Social Security taxes while you were working.
- Medical insurance, sometimes called Part B, pays for physicians' services and some other services not covered by hospital insurance. Medical insurance is optional, and you must pay monthly Part B premiums. $185 in 2025, estimated $206 in 2026.
- Prescription drug coverage, sometimes called Part D, pays for prescription drugs. Prescription drug coverage is optional, and you must pay monthly premiums. However, you also may be able to get extra help paying the monthly premiums, annual deductible and prescription co-payments.
- If you are already getting Social Security benefits when you turn 65, your Medicare (Part A) starts automatically.
If you are already receiving disability or survivors benefits when you apply for retirement
- If you are receiving disability benefits when you reach full retirement age, nothing will change, except that your benefits will be called retirement benefits instead of disability benefits.
- If you are receiving survivors benefits and you also are eligible for your own higher retirement benefits, you can switch from survivors to retirement benefits as early as age 62 or as late as age 70.
- In many cases, widows/widowers begin receiving one benefit at a reduced rate and switch to the other benefit at an unreduced rate at full retirement age. However, if you switch, you will be paid only the higher of the two benefits, not both.
To Review Your Best Options, can Call / Text at 346-567-8300, E-mail or Schedule an Appointment at the top right of this web site.